The Euro has been much weaker in recent weeks as concerns mount over the ability of the Italian government to be able to repay its debts and the size of the budget deficit. Expectations are for the Euro to struggle further on these concerns, it is unlikely we will see a quick resolution in the issues. Whilst yesterday we have seen the Euro slightly stronger as there was a belief that the budget deficit target will not be reached, today the concerns are back once again.
Italy proposed to aim for a budget deficit of 2.4% of GDP, Gross Domestic Product, well within the Eurozone rules of 3%. The concern that has shaken the Euro is the belief that they are not doing enough to address the sovereign debt which stands at 130% of GDP. Italy’s coalition government has come into power on some strong borrowing and spending promises to win support.
Expectations for the Euro are now going to be centred around the likelihood that Italy will not be able to match their promises and the concerns open up barely healed wounds relating to Eurozone debt problems. The overall expectation in the future will be that these concerns do resurface and this would put pressure on the Euro.
If there can be progress made on Brexit, GBPEUR rates may well rise to above 1.15 in the coming weeks as the Euro remains weak. Just looking at EURUSD, we can see the levels are favourable, having dipped into the 1.14’s recently.
If you have any transactions to consider buying or selling Euros, please do get in touch to discuss. We are awaiting some key developments on the Brexit and also Italian debt issues, any major deviation in these events could trigger significant movement on GBPEUR. Movements of 2-3 cents in either direction cannot be ruled out over the coming weeks.
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